Zomato has started laying off employees this week, sources told Moneycontrol , as the food delivery platform looks to cut costs and turn profitable, in an increasingly challenging macro environment.
People familiar with the matter said at least 100 employees have been already impacted across functions such as product, tech, catalogue and marketing, though people in the supply chain haven't been impacted. The company plans to layoff atleast 4 percent of its total workforce.
“These roles had become redundant as these employees who were mostly from mid-to-senior roles were working when the product was being revamped. Not that the product work is over, they have been let go,” a source said requesting anonymity.
Another source said that Zomato founder and CEO Deepinder Goyal held a townhall a few days ago where he hinted that there will be job cuts across functions that were not performing well. A few account managers dealing with cloud kitchens have already been replaced, sources said.
The layoffs come soon after three top level exits from the company in the last three weeks. Zomato's co- founder Mohit Gupta, new initiatives head Rahul Ganjoo and intercity head Siddharth Jhewar had quit, prompting concerns of stability at the senior management level.
It may be noteworthy that off late startups have been laying off employees amid the much-talked-about long funding winter.
Zomato did not respond to queries from Moneycontrol until press time.
Interestingly, Zomato had claimed to break even in food delivery in the September quarter as it recorded an Adjusted Ebitda of Rs 2 crore for the segment.
Food business sputtering?
The company said that the gross order value of its food business rose 3 percent in Q2 compared to the previous quarter. This was on expected lines as the September quarter saw a softening of demand across the retail sector and the e-commerce segment due to a spike in inflation.
But, the bigger problem seems to be that the growth of its food delivery business has slowed as it has become bigger – quarterly sales have grown only 22 percent from Rs 5,410 crore in Q2 of FY21 to Rs 6,631 crore in Q2 of FY22.
In contrast to this, quarterly sales grew 158 percent from Q2 of FY21 to Q2 of FY22.
However, there might also be a bright spot. Marketing cost has come down 23 percent year-on-year to Rs 300 crore in Q2 and delivery expenses have dropped 28 percent to Rs 283 crore.
Given that the company's revenue has grown 62 percent over this period, it would seem that the operating leverage and scale effects that investors have been longing to see are finally kicking in.
Zomato's net loss for the quarter narrowed to Rs 250.8 crore against Rs 434.9 crore registered in the same quarter last year. Meanwhile, revenue from operations zoomed 62.20 percent to Rs 1,661.3 crore.
On Friday, shares of Zomato settled at Rs 67.15 apiece on the BSE, down 0.89 percent, while the benchmark Sensex closed 87.12 points or 0.14 percent lower at 61,663.48.